Report No. 12
B. Other insurance business.
5. Computation of profits of other insurance business.-
The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938, to be furnished to the Controller of Insurance, subject to the following adjustments-
[Sch., rule 6, earlier half, part]
(a) any sum written off in the accounts as representing depreciation of any building, machinery, plant or furniture used for the purposes of the business shall be allowed as a deduction, whether such sum is or is not admissible under the provisions of section 32(1) clauses (i) and (ii) [10(2) (vi)1, subject to the condition that the aggregate of all such deductions allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), or under any Act repealed by that Act or under executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force, shall, in no case, exceed the original cost to the assessee of the building, machinery, plant or furniture, as the case may be;
(b) subject to the other provisions of this rule, any deduction which is not admissible underons regarding business deductions] in computing the profits and gains of a business shall be added back:
[Sch., Rule 6, earlier half part]
(c) any amount either written off or reserved in the accounts to meet depreciation of or loss on the realisation of investments shall be allowed as a deduction, and any sums taken credit for in the accounts on account of appreciation of or gains on the realisation of investments shall be treated as part of the profits and gains.
[Sch., Rule 6, latter half, read with Rule 3(b)] C-Other provisions.
6. Profits and gains of non-resident person.-
(1) The profits and gains of the branches in India of a person not resident in India and carrying on any business of insurance, may, in the absence of more reliable data, be deemed to be that proportion of the world income of such person which corresponds to the proportion which his premium income derived from India bears to his total premium income.
[Sch., Rule 8, para. 1]
(2) For the purposes of this rule, the world income in relation to life insurance business. of a person not resident in India shall be computed in the manner laid down in this Act for the computation of the profits and gains of life insurance business carried on in India.
[Sch., Rule 8, para. 2]
(1) For the purposes of rules 1 to 6 [other rules regarding insurance business] and of this rule,-
(i) "gross external incomings" means the full amount of incomings from interest, dividends, fines and fees and all other incomings from whatever source derived (except premiums received from policy-holders and interest and dividends on any annuity fund), and includes also profits from reversions and on the Sale or the granting of annuities, but excludes profits on the realisation of investments:
Provided that incomings, including the annual value of the property occupied by the assessee which but for the provisions of section 44 [10(7)] would have been assessable under the head "Income from house property", shall be computed in the manner applicable to income chargeable under that head, and that there shall be allowed from such gross incomings such deductions as are permissible in respect of income chargeable under that head;
[Sch., Rule 50i)]
(ii) "investments" includes securities, stocks and shares;
[Sch., Rule 5(v), modified]
(iii) "management expenses" means the full amount of expenses (including commissions) incurred exclusively in the management of the business of life insurance, and in the case of a company carrying on other classes of business as well as the business of life insurance, in addition thereto a fair proportion of the expenses incurred in the general management the expenses incurred in the whole business.
Bonuses or other sums paid to or reserved on behalf of policy-holders, depreciation of, and losses on the realisation of investments, and any expenditure other than expenditure which may under the provisions of sections 30 to 40 [sections regarding business deductions] be allowed for in computing the profits and gains of a business, are not management expenses for the purposes of rules 1 to 6 [all other rules regarding insurance business] and of this rule;
[Sch., rule 5(iii)]
(iv) "life insurance business" means life insurance business as defined in clause (11) of section 2 of the Insurance Act, 1938 (4 of 1938);
[Sch., rule 5(iv)]
(v) "rule" means a rule contained in this Schedule.
(2) References in rules 1 to 6 [other rules regarding insurance business] and in this rule to the Insurance Act, 1938 (4 of 1938), or any provision thereof, shall, in relation to the Life Insurance Corporation of India, be construed as references to that Act or provision as read with section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956).